Dáil Éireann Debate, Tuesday - 22 May 2012
229 Deputy Dominic Hannigan asked the Minister for Finance the way the change to civil partnership legislation has affected cohabiting couples who are seeking to share tax credits when one is working and the other is not; and if he will make a statement on the matter. [25260/12]
Amharc ar fhreagraThe position is that changes included in Finance (No. 3) Act 2011 arising from the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 gave effect to specific provisions in relation to the taxation of civil partners under which they can elect to be jointly or separately assessed to tax or indeed to continue to be treated as single persons. It also allows for the transfer of tax credits between civil partners. The Finance (No. 3) Act 2011 also provided for a new scheme of tax relief for court ordered maintenance payments and asset transfers to a former financially dependent cohabitant, subsequent to the break-up of a cohabiting relationship. This also arose from the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010. However, apart from that, cohabitating couples are not recognised for the purposes of income tax law and they have no entitlement to transfer tax credits or tax bands between themselves. The civil partnership legislation and the subsequent tax legislation made no changes in this area.
230 Deputy Dominic Hannigan asked the Minister for Finance if he has had any communication with the Department of Social Protection over the anomaly whereby people who are cohabiting are means tested for job seeker’s allowance but are not allowed share tax credits under the rules of the Revenue Commissioners; his plans to end this anomaly; and if he will make a statement on the matter. [25261/12]
Amharc ar fhreagraThe aim of the Department of Social Protection in means testing for job seeker's allowance individuals who are seeking employment is not the same as the Revenue Commissioners in administering tax credits which are available for offset against liability to income tax on earnings. The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy vs. the Attorney General (1980), which held that it was contrary to the Constitution for a married couple, both of whom are working, to pay more tax than two single people living together and having the same income.
The Taxes Consolidation Act 1997 provides for the granting of tax credits based on the civil status of the claimant. A person who is single is entitled to a basic personal credit of €1,650 and this is doubled to €3,300 for a married couple or civil partners who are jointly assessed. Should the couple choose separate treatment or single assessment, each individual is entitled to a personal credit of €1,650. Married couples or civil partners can transfer tax credits and tax bands between the individuals, and this is of benefit where one of the individuals earns less that the 20% tax threshold of €32,800 or where one of the individuals has no income.
A cohabiting couple where both partners are working also get, in total, the same tax credits as a married couple or couple in a civil partnership (i.e. €3,300). However, they are treated as separate and unconnected individuals for the purpose of income tax and, accordingly, credits, tax bands and reliefs cannot be transferred from one partner to the other. The treatment of cohabiting couples for the purposes of social welfare is primarily a matter for the Minister for Social Protection. However, it is also based on the principle that married couples should not be treated less favourably than cohabiting couples. This was given a constitutional underpinning following the Supreme Court decision in Hyland v Minister for Social Welfare (1989) which ruled that it was unconstitutional for the total income a married couple received in social welfare benefits to be less than the couple would have received if they were unmarried and cohabiting.
